'We wanted our own home for baby Lauren': How to get on the ladder if you want out of Generation Rent

Hopeful first-time homebuyers are under fire on all fronts this summer as tough new mortgage affordability rules kick in, rates and fees start to rise and commentators call for the low-deposit Help to Buy mortgage scheme to be scaled back or withdrawn.

So should ‘Generation Rent’ give up hope of owning at all – or will it still pay to struggle on to the housing ladder?

‘Buying your first home is never easy but with the right support it is still possible,’ says mortgage expert John Allen of Team Financial Services in Exeter.

Here is the latest state of play for desperate house-hunters around the country.

THE RISKS

Pessimists say today’s first-timers could be buying at the peak of the market – and risk seeing their property value fall just as their mortgage payments rise.

They say low-deposit buyers face the real prospect of negative equity, with their homes worth less in the future than the mortgages they took out to buy them.

We wanted our own home for baby Lauren

Anthony and Katy Pimblett lived in a cramped rented home near Bristol when baby Max arrived nearly three years ago – and they didn’t want to stay there when their second child was due last winter.

Fortunately the Help to Buy scheme allowed them to become first-time homeowners just before Katy gave birth to Lauren in December.

‘It would have taken us five years to save a 20 per cent deposit and get a mortgage for the rest, so we were delighted when Help to Buy offered us the chance to get a family home so much sooner,’ says Anthony, a design manager for a local heating company.

The couple, both 36, bought a three-bedroom semi-detached house with a garden on the Fern Green development in Langport, Somerset, and developer CG Fry helped them find a mortgage with just a 5 per cent deposit.

There are also fears that new borrowers who can afford their monthly repayments when the base rate is at its current record low of 0.5 per cent may struggle when it heads back towards more normal levels.

And while new affordability checks introduced in April mean buyers have to consider the cutbacks they would have to make after a steep rate rise, there are fears that an economic shock and a wave of job losses could trigger a new repossessions crisis.

THE REWARDS

Optimists point to recent rapid property price growth, though national averages are heavily skewed by overseas money flooding into the top of the market in London.

Prices look to be growing far more slowly in many other regions and are often below peaks reached in 2007.

Moreover, property fans say home improvements and a bit of patience can help owners buck local averages and end up ahead.

Buying can also help owners escape big rises in average rents. Lender BM Solutions says several areas including London and Wales saw double-digit rent increases last year and predicts more of the same as demand from tenants continues to outstrip supply.

The best advice for buyers with small deposits is to drive a hard bargain – particularly on new-build homes.

If the economy does dip again it will pay to have picked a home you will be comfortable in for several years as you ride out the storms.

Homes you can improve or that have a spare room for a lodger can be financial life-savers. If your first mortgage costs less than your rent – a common situation – then it is sensible to save the difference so you have spare cash for when rates rise.

THE MORTGAGES

Lloyds Bank recently cancelled its Lend a Hand scheme, which allowed parents to help children who are first-time buyers get on the housing ladder, and has limited what it will lend in expensive areas such as London.

Plenty of first-time deals are on offer elsewhere, but finding the most suitable does take a lot of research as rates, fees and small print vary widely.

Shop around between big lenders including Barclays, Halifax, Nationwide Building Society, NatWest and Santander if you are buying a new-build home with a 5 per cent deposit under the ‘equity loan’ phase of Help to Buy – the scheme that gets you access to interest rates normally associated with big-deposit buyers.

If you are buying an older home you can consider a wider range of Help to Buy lenders in the scheme’s second ‘mortgage guarantee’ phase, where interest rates are slightly higher.

As well as the big five look at others including Virgin Money and newcomer Aldermore. Go to helptobuy.org.uk for the pros and cons of each scheme.

First-timers should also consider avoiding Help to Buy complications with ‘ordinary’ low-deposit mortgages.You need a spotless credit record but you can probably find two-year fixes at around 5 per cent.